Many employees and members (“consumers”) of health maintenance organizations, employer groups and government entities have their purchases of personal prescription medications subsidized by payments to pharmacies through prescription benefit plans (“plans”) offered by those health maintenance organizations, employer groups and government entities. Under such plans, a consumer receives a prescription for a medication from his or her physician and submits it to a pharmacy to be filled. The pharmacy checks to see that the consumer is a member of a plan with which the pharmacy has a contract and that the medication and dosage prescribed are within the approved scope of the plan contract. Upon verification of these requirements, the pharmacy dispenses the medication to the consumer. The consumer pays the pharmacy a “copay” amount, less than the normal cost of the medication. The pharmacy receives the balance of the payment for the medication and its dispensing services from the prescription benefit plan, which is managed by a “prescription benefit manager” (“PBM”) with whom the health maintenance organization, employer group or government entity (“payer”) has contracted to manage the plan. The PBM invoices the payer (i.e., the PBM's customer) for the consumer's transaction, along with a charge for its contracted fee, and from the funds paid by the payer the PBM pays the pharmacy's balance due.
Medication usage is commonly differentiated between acute care usage, which is short term (30 days or less) administration to treat immediate illnesses or conditions, and maintenance usage, which is long term (more than 30 days) treatment of chronic illnesses or conditions such as hypertension, high cholesterol levels, arthritis, neurology conditions and the like. Maintenance medication dispensing and usage represents a major health care cost (on the order of 75% of prescription costs for many plans, especially due to the aging of the American population) and therefore control of maintenance prescription costs is a principal function of the prescription benefit plans. Dispensing pharmacies are normally of two types: retail pharmacies (which are local neighborhood businesses where the consumer appears in person, can meet with a pharmacist, orders his/her medication and can usually leave a few minutes later with the dispensed medication in hand) and mail order pharmacies (which are large facilities, usually not open to individual consumers' personal visits, but from which a consumer's medication order received by mail or through the Internet is subsequently filled and dispensed to the consumer via mail or courier service). It is normally recognized by the industry that acute care prescriptions are dispensed primarily by retail pharmacies, since the consumer frequently needs the medication immediately and cannot accept the multi-day delay inherent in submitting and dispensing prescription medications from the mail order pharmacies.
On the other hand, PBMs and benefit consultants commonly strongly urge or even mandate that consumers in the plans that they administer obtain their maintenance medications from mail order pharmacies. It is a widely held belief that mail order pharmacies may have lower operating costs and may offer greater discounts available on medication coverage. To the extent that such is the case, use of mail order pharmacies may be a desirable cost control strategy if other contractual terms remain equalized. However, several factors can complicate the analysis of use of mail order pharmacies versus use of retail pharmacies especially for dispensing of maintenance medications. For instance, some PBMs own mail order pharmacies, and therefore it is to their financial benefit to steer the consumers in their plans to their captive pharmacies whether or not that is in the best interest of the consumers. Further, to the extent that business is diverted unreasonably from retail pharmacies to mail order pharmacies, the former are deprived of income. Since the retail pharmacies are commonly localized businesses (in contrast to mail order pharmacies), their ability to survive to provide the local retail service is impaired. This is true even when a local pharmacy is part of a larger chain pharmacy organization, since decline in income of a local site could lead the chain to close that local site, notwithstanding that other locations of the chain's pharmacies remain in business. Further, there are many variables in the pricing of medications and the costs involved in inventories, dispensing equipment, transportation of medications to the pharmacy and later to the consumer and staffing, that have been shown to affect whether mail order does or does not have a financial advantage over retail in the dispensing of medications. All that can be said is that, properly managed, both types can be financially and commercially viable.
Further, and very significantly, there is a question of availability of choice for the consumer, since in many cases a consumer would like to have the option of dealing either with his/her local pharmacy or a mail order pharmacy. Numerous studies have established that for many prescription consumers, direct contact with a pharmacist is very important. Professional pharmacists are held in very high regard by consumers and their advice is eagerly sought. Most consumers are not knowledgeable about medications and a prescribing physician's schedule may not provide sufficient time for a consumer to be able to get what he or she believes to be sufficient information from the prescribing physician about all aspects of concern about a prescribed medication. Consumers want to be able to speak directly to their pharmacists for more information about their medications and receive detailed answers to their questions and concerns, especially when a maintenance medication which will be taken by the consumer over a prolonged period is involved. It is well known that the prospects for a consumer's (patient's) successful implementation of a medication regimen are greatly enhanced when the consumer/patient understands and is comfortable with the medication prescribed. Such direct and personal contact with a pharmacist is frequently difficult for a consumer to obtain from a mail order pharmacy, and even when available will almost certainly not involve a pharmacist who is “local” to the consumer and his/her community.
Because the cost of medications is so high and is such a large component of medical care costs generally, there is an on-going effort on the part of PBMs and payers to seek ways in which to control medication costs. Pharmaceutical medications are commonly available to consumers (patients) either in “brand name” (proprietary) or generic form. In some cases, especially for new or patented medications, only the brand name medication is available, usually only from a single source—the developer of the medication. For many others, however, there is no proprietary limitation on manufacture of the medication, and multiple sources of the medication—in generic or alternative brand name form—are available. Further, it is common that for a given class of pharmaceuticals, there are several different medications with substantially equivalent medical and physiological effects. Some of these medications may be proprietary brand name products while others may be generic and yet others may have be available in both generic and brand name forms. Retail prices charged by pharmacies can vary widely, especially where a particular medication is available in both brand name and generic form. Reimbursement rates paid to pharmacies vary depending on the product based on traditional reimbursement methodologies.
Physicians and other health care providers who write prescriptions therefore often have choices among the different medications they can prescribed for a patient. A physician can, for instance, prescribe a brand name medication or a generic form of that medication, or he/she can choose between two or more different but equivalent medication compositions. If the physician prescribes a brand name medication, he/she can also designate whether a dispensing pharmacy must dispense only that specific medication or can substitute an equivalent generic medication. There are of course significant differences in retail cost among the different medication forms, with generic forms normally being substantially lower in cost than brand name medications. However, either within each group (brand name or generic) there can be substantial cost differences, depending usually on the wholesale prices set by the various manufacturers. Thus for a single therapeutic category a physician, pharmacy and patient may be faced with numerous forms of the same or equivalent medications, all with different pricing.
What would instead be desired is a system in which the pharmacy best suited to fulfill a prescription is the pharmacy that is actually selected to fulfill the prescription. Ideally, such a system would quickly match pharmacies to the prescription requests that they are best suited to fulfill. Preferably, this matching would be accomplished in a manner that reduces costs, but does not rely solely upon pricing/costs to determine which pharmacy is best suited to fulfill each prescription. Preferably as well, this system would simplify prescription ordering services and operate with minimum burden on the patients using the system to fulfill their prescriptions. In addition, this system would preferably select either mail order or retail pharmacies—depending upon which is best suited to fulfill each particular patients' prescriptions. Also, this system would preferably work with pharmacies/suppliers of both “brand name” and generic medications such that the cost differences between equivalent medications can be taken into account. For example, by selecting a pharmacy that supplies generic medication when a physician has written a “brand name” prescription.
For the reasons set forth above, many patients today are not able to optimally select the best pharmacy for their needs. Instead, they are simply attracted to on-line mail order pharmacies to reduce prescription costs. Although many patients are able to obtain prescription medications at reduced costs, the use by patients of on-line mail order pharmacies have some serious disadvantages, as follows.
First, the patient typically is only able to select the purported “best” mail order pharmacy on the basis of medication cost. As such, there is no ability for a patient to select the best pharmacy on any other basis, including but not limited to: pharmacy expertise, the pharmacy's physical location, and/or the appropriateness of any substitute or generic medication. As such, most patients are not properly qualified to make assessments of which pharmacy is “best” for their particular prescription fulfillment.
Second, the patient is typically only seeking to have one prescription filled at a time. It would instead be more efficient if patients could pool their prescription needs such that different pharmacies could specialize in fulfilling different prescriptions (thereby providing optimal costs and services). This would also permit different pharmacies to more efficiently manage their inventories.
Third, patients typically have to decide between dealing with an “in-person” pharmacy or an “on-line” pharmacy. It is difficult for a patient to simultaneously utilize or compare both in-person and on-line pharmacies. This is problematic since one particular in-person or on-line pharmacy may be best suited to fill one of the patient's prescriptions, while another particular in person or on-line pharmacy may be best suited to fill another of the patient's prescriptions. Moreover, the same patient may have different prescription requests—with a retail pharmacy being best suited to fulfill one prescription and a mail order pharmacy being best suited to fulfill another prescription.
Fourth, the need exists for a coordinated system to manage and track patient prescription fulfillment. The data from such a system could ideally be used to track prescription ordering histories and to provide data that can be analyzed to determine how to increase prescription fulfillment efficiencies.